It’s time to stop rewarding the bad
The result of the latest British election, which ended up with a hung Parliament, and no clear majority, is a neat metaphor for why our current system is collapsing, and a clear direction about what needs to replace it.
In case you don’t follow British politics, the Conservative Party had planned to carry on with a ‘hard’ Brexit and a number of hard choices in an austerity program intent on balancing the budget, while Labour promised to eliminate university tuition, nationalize public services and offer free childcare by vastly enlarging state control.
The British public didn’t give a mandate to either side for one simple reason: both were deeply unfair, and unfairness, pure and simple, was what this election – and all the recent elections in the US and even France – were all about.
As I wrote about in my book The Bond, the very soul of any successful society is a sense of fair play, and the extent to which any society begins to fray relates to a deterioration of a sense of fairness.
The roots of this impulse appear to run very deep and are primal in many living things. As studies have shown, even monkeys go berserk if they are unfairly rewarded with a cucumber when their fellow monkey is given a grape for carrying out the same task.
Our sense of fairness has nothing to do with a need for sameness — or across-the-board socialist-style equality. Throughout history, the fact that there is a wealthy group of individuals at the top of any society has not automatically made for revolution.
Poorer levels of society are usually only prompted to rise up in rebellion when conditions are manifestly unfair, such as when food is deliberately made scarce.
Or, say, in the wake of the worldwide financial crisis of 2008, when investment houses like Goldman Sachs still paid record bonuses after the recession they had helped to create caused so many others to lose their jobs.
Returning the favor
But fairness entirely rests on the assumption that this impulse also exists in the person who is the object of our generosity, and that he or she will automatically return the favor.
Most of us possess an in-built scorecard that abhors a freeloader, with a corresponding need to punish those who take more than their fair share, even if it comes at our own expense.
This has also been proved in game theory, with a game called the “Public Goods.” This game is designed to test how people behave when asked to contribute to something that could benefit the entire community, but at a price to themselves. It’s a bit like asking people to voluntarily pay a sum of their own choosing in taxation toward maintaining the parks in California.
In this scenario, a number of participants are given tokens, which are redeemable at the end for money. They’re allowed to decide secretly how much of it to keep and how much to put into a common pot. The experimenters then award some percentage of the total in the pot.
The irony of the game is that everyone makes the most money when forfeiting all his own tokens, since the experimenters reward the most from the highest amounts within the pot.
Of course, the standard view is that people won’t put anything into the pot, but keep all money themselves, but that almost never happens among the large number of Public Goods experiments carried out by researchers; most people add something to the pot and the average is for people to give up half their tokens for the public good.
A very different scenario emerges during repeat Public Goods games. Although the urge to give is initially enormous — on average, people begin playing by giving up 60 per cent of their tokens —this generous impulse quickly diminishes so that, by the final rounds, nearly three-quarters of all people contribute nothing.
When interviewed later, those participants who had initially been generous grew increasingly furious at freeloaders, who were either contributing nothing or less than the others.
The generous players had retaliated with the only weapon available to them: they’d stop contributing to the public fund. Soon after, cooperation quickly deteriorates, and the game, in effect, falls apart.
It’s a bit like a taxpayer, annoyed at loads of able-bodied people on welfare rolls, refusing to pay his taxes.
Today we are in the midst of a real-life Public Goods games where everyone is refusing to play. Everybody is seen as some kind of freeloader, taking more than his fair share.
We have, for instance, public servants like nurses stuck on 1 per cent pay rises furious when they hear that Sir Fred “the Shred” Goodwin, former chief executive of Royal Bank of Scotland, unapologetically allowed to pay himself a £700,000 pension (about $1.05 million) despite the bank’s sustaining, under his stewardship, the largest corporate loss in history, requiring a £24 billion government bailout.
But we also have middle class hard-working people terrified of Labour plans to increase taxes of all sorts, including those on property and inheritance, which would land them with no alternative but to sell their house before their death, with little to leave their children already struggling to get onto the property ladder.
People already are inherently fair and generous. If you don’t believe that, witness the extraordinary heroism and generosity displayed in Manchester and London during the recent terrorist attacks. But that fairness and generosity is not displayed in our modern politics or our modern economic system.
A common value system
It’s all about recognizing our common value system and using it to stop rewarding ‘bad.’
Stealing from consumers through reckless trading and getting vast bonuses for doing so is bad.
Having a stock market that returns vast profits to companies that pollute the environment or make our children fat is bad.
Attempting to create a more level playing field by punishing small businesses and the middle-class people who work hard with higher taxes (which large corporations that can easily emigrate will avoid) is also unfair, and therefore bad.
We have the common value system in our DNA, and we saw it this week, in London, after the giant high-rise went up in flames. So many people rushed forward to give money, clothing, food for the dozens of people who fled the building with just the pajamas on their back that social services had to ask people to stop the onslaught of giving.
All we need to do is create a different type of model, a new Public Goods game where everyone contributes, in some way, to the best of their ability without getting unduly penalized, and we reward the good – the products that contribute to our environment, say – and not the bad. And then we need to teach the politicians, most of all, how to play it.